U.S. Tariffs on Steel Are Illegal, World Trade Organization Says

Published: November 11, 2003

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American manufacturing companies that use steel have urged the president to lift the tariffs. They say the tariffs have raised their costs, cut their profits and forced them to delay expansion and lay off employees. If those consequences were not reason enough to lift the tariffs, the threatened retaliation completes the argument, said William E. Gaskin, the head of the Consuming Industries Trade Action Coalition Steel Task Force, a lobbying group.

''The U.S. now faces billions of dollars in retaliatory tariffs by our trading partners,'' Mr. Gaskin said. ''For the sake of the U.S. manufacturing sector, it's time to end the tariffs now.''

In late September, two reports on the tariffs by a United States government agency, the International Trade Commission, said that the case was muddy and that it was difficult to distinguish whether the tariffs or changing market conditions were responsible for the problems of steel consumers.

Calculations about the political fallout from the tariffs could be upended by the European Union's proposed list of sanctions. It has said that it plans to aim at agriculture with tariffs on vegetables, fruits and nuts from Florida and California.

Various kinds of clothing -- including coats, underwear, shirts and blouses -- are also on the list, a potential blow to Southern states with ailing textile industries. Steel and metal products, including Harley-Davidson motorcycles, along with paper products, furniture and games also made the list.

Trade experts point out that the United States used similar tactics after the W.T.O. ruled in 1997 against a European Union quota system favoring the import of bananas from its members' former colonies and its ban on American beef raised with hormones.

''The U.S. made its trade sanctions even more onerous on Europe by pinpointing certain countries and having a constantly changing set of retaliation, spreading the pain more broadly,'' said Richard Cunningham, a trade lawyer at Steptoe & Johnson.

Even without the tariffs, some experts said, global shortages of steel as soon as early next year could raise prices, benefiting the American steel industry.

Trade experts said Monday that a growing demand for steel in China could lead to shortages in the first three months of next year.

''It is my judgment we are going to have a price spike, perhaps a severe one, as steel buyers worry about the availability of raw materials for the steel industry,'' said Peter Marcus, a managing partner of World Steel Dynamics, an information service based in Englewood Cliffs, N.J.

Unions have joined in the debate. Leo W. Gerard, president of the United Steelworkers of America, said that lifting the tariffs could lead to more bankruptcies in the steel industry, and the loss of his members' medical and retirement benefits.

But Gary C. Hufbauer, a senior fellow at the Institute for International Economics, said that if Mr. Bush believed that the steel industry needed further relief, he should persuade Congress to provide relief for steel workers and not continue the tariffs.

Photo: A coil of steel is loaded onto a ship at the Port of Cleveland for delivery to Spain. The European Union could impose sanctions on the United States now that a trade panel has said that steel tariffs are illegal. (Photo by Associated Press)(pg. C2)